Many retirees aren't taking required distributions. It can cost them.
- - Many retirees aren't taking required distributions. It can cost them.
Andrea Riquier, USA TODAY December 28, 2025 at 8:30 AM
0
‘Tis the season for last-minute shopping, family get-togethers, and year-end financial tasks. But many Americans forget the last item – or don’t do it correctly – leading to tax penalties and, often, similar mistakes in subsequent years, according to a new report.
The analysis, from wealth management behemoth Vanguard, looks at Required Minimum Distributions. Millions of Americans participate in retirement accounts like 401(k)s and IRAs, which allow participants to tuck away money tax-free until later in life. As their name implies, RMDs set a minimum amount that must be withdrawn and taxed once those account holders hit a certain age – 73, for traditional IRA and 401(k)s.
Among Vanguard clients with traditional IRA accounts, nearly 7% of those for whom RMDs are required failed to take any withdrawal from their Vanguard account in 2024. Another 24%, meanwhile, took a withdrawal that was too low to meet the requirement.
Many Americans forget or fail to take required distributions from retirement accounts, a new analysis finds.
The 7% who took no RMD whatsoever incurred a potential tax penalty ranging from $1,160 to $2,900, the analysis found.
What’s more, investors who successfully complete their RMD one year tend to do it again the following year – but 55% of those who miss an RMD one year also fail to take a distribution the next year.
“Rather than ‘set and forget,’ many simply 'forget and forget,'" said Andy Reed, Vanguard’s head of behavioral economics research, in the report.
More: New 401(k) catch-up rule may hit older high earners in 2026
Most investors who missed their RMD had balances under $5,000. Only 2.5% of investors with balances over $1 million did.
With all that in mind, what can investors do to protect themselves? Vanguard notes that many IRA providers offer free auto-RMD services. Also, since smaller accounts may be more prone to being overlooked when it comes to maintenance like RMDs, consolidating them might simplify financial and retirement planning decisions.
This article originally appeared on USA TODAY: Nearly 7% of retirees don't take required withdrawals, a tax no-no
Source: “AOL Money”
